The EU threatens Microsoft with a new fine

The European Union's antitrust case against Microsoft takes a new twist as …

Just when Microsoft thought its antitrust problems were winding down, they seem to be ramping up again, first in South Korea and now in Europe, where Microsoft is facing further EU fines of €2 million per day for noncompliance. Microsoft, for its part, believes that the EU keeps changing the rules, which makes it almost impossible for the company to come into compliance with the original ruling.

The current problem goes back the sanctions laid on Microsoft last year, in which they agreed to three things: pay a fine, unbundle software from Windows, and disclose information about their server products. They were given until December 15, 2005 to comply, but the EU claims that the company's only batting two for three. The fine was duly paid and Windows XP N was duly produced (even if no one wanted it), but the server information has come up short.

After Microsoft agreed to the sanctions, a Monitoring Trustee was agreed to by both parties. In this case, the Trustee was Neil Barrett, a British professor, and his job was to evaluate whether Microsoft had complied with its obligations regarding server software. His latest report claims that the information released by Microsoft is wholly inadequate to allow other companies to code interoperable products. He concludes:

"Overall, the process of using the documentation is an absolutely frustrating, time-consuming and ultimately fruitless task."

On the basis of the Trustee's report, the EU has given Microsoft five weeks to bring itself into compliance, with the penalty for failure being a €2 million daily fine—one that would be backdated to December 15, 2005. After coughing up €500 million already, Microsoft is in no mood to pony up more cash. Brad Smith, Microsoft's General Counsel and a Senior VP, responded to the EU ruling with frustration over the process.

"We are fully committed to comply with the Decision. We've shipped a new version of Windows, we've paid an historic fine, and we've provided unprecedented access to Microsoft technology to promote interoperability with other industry players. In total, we have now responded to more than 100 requests from the Commission. We continue working quickly to meet the Commission's new and changing demands. Yet every time we make a change, we find that the Commission moves the goal post and demands another change.

Of particular concern is the Commission?s latest demand that the internal workings of Windows be documented and licensed, which can open the door to the production of clones of parts of the Windows operating system. During the September 3, 2004 hearing with President Vesterdorf, the Commission clearly stated this was not within the scope of its decision. Yet the Commission confuses disclosure of the source code with disclosure of the internals and insists that it will fine the company if it fails to address this."

Microsoft is obviously worried about its intellectual property here, and doesn't want to make it possible for others to clone Windows. (Though conspiracy theorists allege that Microsoft doesn't want to show the whole code because it may provide proof that the company has designed its code to work better with other Microsoft products.) This doesn't seem to be what the EU thinks it's asking for, though. Their order covers only interface information, not core source code. The latest ruling asks Microsoft "to disclose complete and accurate interface documentation which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers."

We haven't heard the last of the case; Microsoft is vowing to appeal even as the EU is talking tough on fines. We'll know more come January 25, 2006, when Microsoft is required to comply with the ruling or pay up.